KUALA LUMPUR (July 1): Kenanga Research has maintained its “underweight” rating on the property sector and said the sector's headwinds remain aplenty, including oversupply, high household debt, elevated interest rates, and weakened consumer sentiment resulting from high inflation and rising living costs.

In a note on Monday, the research house said the market has adequately priced in the immediate to short-term impact of data centre investment and Johor economic transformation to the sector.

“Nonetheless, we see a bright spot in the affordable housing segment.

“We downgrade our calls for Mah Sing Group Bhd (KL:MAHSING) (TP [target price]: RM1.87) to 'market perform' (from 'outperform'), and Sime Darby Property Bhd (KL:SIMEPROP) (TP: RM1.08) and UOA Development Bhd (KL:UOADEV) (TP: RM1.79) to 'underforperform' (from 'market perform') as their valuations have become rich after the recent run-up in their share prices," it said.

Kenanga said its sector top pick is MKH Bhd (KL:MKH) (TP: RM1.83), given "its focus on affordable homes priced below RM500,000 with strong demand from first-time house buyers, its transit-oriented development projects that will benefit from the switching to public transport from private vehicles following fuel subsidy rationalisation, and its expanding plantation business in Kalimantan and its proximity to the new capital city of Indonesia that opens itself up to various opportunities."